Does a Special Needs Trust Require an EIN?

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An employer identification number, or a federal tax identification number, exists as a 9-digit sequence of numbers used to identify a business or trust for taxation purposes. The Internal Revenue Service acts as the governing body responsible for issuing an EIN. When a special needs trust gets established, an EIN must be acquired from the IRS.

Significance

  • A special needs trust is set up with the intent of distributing assets to a disabled beneficiary. Establishing a special needs trust allows a disabled person to receive assets from an inheritance without interrupting their Social Security and Medicaid benefits. A disabled person may not inherit more than $2,000 without interrupting his social security and Medicaid benefits, as explained by the Martha A. Churchill website. A special needs trust can provide a beneficiary with funds to purchase a home and money to pay for medical and other health-related expenses.

Types

  • A family trust, pooled trust and court-ordered trust are the three types of special needs trusts. A family trust is usually established by the parents of a disabled individual. The money a beneficiary receives from a special needs family trust cannot be used to purchase food, clothing or housing, since this will affect a beneficiary’s government benefits. In a pooled trust, anyone can contribute assets to the trust like the beneficiary herself or the beneficiary’s grandparents. A pooled trust must be established through a nonprofit association, according to the Martha A. Churchill website. The nonprofit association acts as the trustee in a pooled trust and has the responsibility of handling tax issues and addressing investment concerns. A court-ordered trust occurs when a disabled person receives a court settlement. Only parents, grandparents, the court or a legal guardian can set up a court-ordered special needs trust. A beneficiary of a court-ordered special needs trust must meet Medicaid and Social Security requirements for disability and be under the age of 65.

Getting an EIN

  • Visiting the IRS website or calling the IRS Business and Specialty Tax Line offers the fastest method to obtain an EIN for a special needs trust. An authorized individual must provide her name, address and Social Security number to acquire an EIN for a special needs trust. The EIN application must indicate the reason for applying for an EIN and the main activity of the special needs trust. The IRS assigns an EIN to the special needs trust at the conclusion of the online or telephone interview.

Considerations

  • The IRS allows a special needs trust to acquire an EIN by mail or by fax. It takes up to four weeks for a special needs trust to acquire an EIN by mail. Form SS-4 can be printed from the IRS website and mailed to the appropriate IRS service center, which varies based on the location. A special needs trust that applies for an EIN by fax will receive an EIN within four business days, as long as the EIN application contains a return fax number.

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